2% net weekly on a 1MM account is fabulous; 2% net weekly on a 5k account is barely beating out commissions if you trade more than 5x per day. Averaging 2% DAILY on low 5-figure account is definitely within reason if you really have an edge to exploit that has good risk/reward ratios -- with NQ range easily averaging 50% of daytrading margin reqs per contract on any given day. Percentage gains on a futures account can be utterly ridiculous to a certain point, but that's a mighty sharp curve between 5k and 1MM. What I want to know is when size starts being cumbersome -- I've not any real idea since I've only at most tried 10 lots and have never had any partials on limit orders. But I intend on expanding size concurrent with % of max margin because I have a funny feeling this edge will eventually run it's course.
Let me start this post by stating that I am speaking to the 99% of all traders that are not; a. extreeeeeemely lucky b. trading geniuses c. lying When you start to look at returns on investment and periods of time longer than say, 6 months, one thing that you must respect and understand is risk. Anyone with a decent system or a lot of skill ( or luck ) can run an account up a bit in a short period of time. ( I turned 10k to 150k in a little over 3 months, in a completely different market by actively trading ) And I like to think I have a good combination of skill and BOS ( if you have to ask, you dont have em ). But over the course of more than a year HUGE returns cant ( read first sentence of post ) be sustained. I have a model that I work from that relies on risk taken on a per trade basis ( assuming you trade at least once a day ) to determine monthly profit targets, and thus can be projected out for yearly and such. First determine your ave risk per trade, then multiply that by 10 ( I have posted this before ). Next, deduct commission from that number ( RT commission X ave amount of trades per month ). There you have a number that can be sustained over a longer period of time, under proper conditions. One caveat, the more risk taken per trade, the higher your drawdowns and higher your chance of complete blowout. Someone that takes 1% of risk per trade, consistently, has about a 20% chance of blowing out their account on a short term basis. ( this is not a highly mathematical figure, just something I came up with from a series of averages ) You can pretty much add 10% to that number for each % of risk you add to 1. ( 30% for 2% risk takers and so on ) All this to say a 100k account that takes a risk of 1% per trade, hits a win rate of 50% or better and has a R/R ratio of 1.5 : 1 or better, and also trades at least once a day can probably turn it into 250k in approximately 10 months. If they keep risk and reward constant, dont overtrade causing huge commissions, dont get caught in a news blip, dont withdraw any money, and avoid an irregular drawdown. Not impossible. Good luck. AllenZ
AllenZ, While I agree with most everything you say in the above post, I simply cannot fathom the line of reasoning that led you to the "20% chance of blowing up on a short-ter basis" Can you please elaborate on how you came up with such a high figure? PEACE and goodtrading, Commisso
Ok Commisso, I should not have said "blowing up". What I meant was quitting or just stopping actively trading. Only about 10% of ALL people that attempt to actively trade will become profitable over the long run. Meaning about 90% will either blowout or quit trading actively, at least for a period of time. I was simply giving a trader that uses 1% risk as a parameter a better chance than most. I dont want to sound skeptical on making a living from trading. I do it, and I attempt to teach others how to by giving realistic goals and displaying my methods. I just dont understand why so many people think it is any different from any other business in the world. In most fields of business a person has about 10-20% chance for success and trading is harder, in my opinion, than most businesses. Once again, sorry for saying "blowing out or up" I meant to say something more along the lines of quitting, getting more capital, or seriously altering ones approach. The actual % may even be higher than my number. I got the number from figuring out how many losses one can expect in a row using a specific win rate and risk ratio, then, using the account size to see when a big enough drawdown might occur to cause one of the above effects. ( and it is late so I rounded off ) Also let me add, I think with proper capitalization, realistic goals, respect for risk, a lot of study and hard work. Throw in some luck and a tradeable market and you may have a better than 80% chance of success. It is late here on the West Coast, and Commisso my friend and thank you for calling me on being so skeptical. I am just getting a little concerned for all the emini traders I see coming into the game thinking they can start with 2 or 3k, no experience in futures, use 2 point stops and make 100% a month. Recipe for disaster. AllenZ
probably because trading is not really very much like a traditional business at all. sure, they share similarities, but the skills required to succeed in business and the skills required to succeed in trading are manifestly different. trading is trading, business is business, a job is a job. all valid forms of creating income, and all quite different. if thinking of trading as a business, or trading as a job, helps someone to take trading more seriously (??? are they trading if not taking it DEAD SERIOUS is beyond me) then fine....but that's where the similarities end.
i say risk the whole enchilada... make sure you let us know what trade you're taking so we can grab a couple of beers and monitor it...
~GULP~ i never realised that.. thanks aphie. man you are so brainy! i bet you're gonna be the greatest thing trading's seen since the soes bandits.. now for the real response: another insipid aphie observation. sounds just like your typical newly enlightened green horn who has just discovered the concept of expectancy..
To turn $20k into $100k I would say that the trading Gods were on my side. After trading one contract for 3 months I had a profit of $5,000. I then risked this whole $5,000 profit on a few large lot trades and it worked, the initial $20k was now $50k. It was a similar route to get to $100k. The problem I have is certainly not size resistance. I just think that my cowboy style position management will not work long term. You can't keep hitting home runs all the time or can you? So I was just looking for some suggestions as to how to go about my money and risk management, from here on in. Any suggested books in this area would be greatly appreciated.
So can you point me in the right direction? I just know that my casino style wont cut it long term so what is the "RIGHT" way to go about it?
It's interesting to watch you vacillate between moments of humility and utter arrogance on this board. We are all familiar with how trading the markets shows us so much about ourselves, eg. motivations, how we handle wins/losses etc, hence the good advice: treat trading as a business i.e. try your best not to let your emotions get in the way of your decisions. That leaves me wondering why you would add to the layer of difficulties you may face starting out with the minis by coming off the way you do? I have a few speculative ideas but I'm keeping them to myself. I wish you the best in your journey and am curious about your forthcoming journal (particularly about psychological aspects that influence your trading decisions if you decide to include that). It will be interesting to note if you experience personal changes once you've got real trading experience with the minis under your belt. p.s I caught the barb you foolishly made about Don before you took it down. I've got a sell limit waiting.